Coinbase’s landmark Supreme Court hearing breaks new ground for crypto
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Coinbase’s landmark Supreme Court hearing on Tuesday marked the crypto industry’s first appearance before the nation’s highest court, but the trial itself was far more important to consumers than to crypto.
The case itself is about companies’ ability to compel consumers to comply with arbitration agreements that a growing number of retail-facing businesses now impose on customers instead of taking cases to court. And it goes far beyond crypto.
Specifically, Coinbase user Abraham Bielski said the Electronic Funds Transfer Act requires the top US cryptocurrency exchange to recredit his account after he was tricked into allowing a fraudster to access his account and steal $31,000, Reuters said.
In another case, several former customers sued Coinbase after being duped into paying $100 to enter a contest to win as much as $1.2 million in Dogecoin.
However, the case before the court has nothing to do with crypto theft or account security measures, but rather whether Coinbase can force Bielski into arbitration. The company says the customer agreement requires arbitration, but judges and then appellate judges allowed both lawsuits to go to court. Which is also not what the Supreme Court decides.
The specific issue before the court is very narrow: Coinbase says it is entitled to an automatic stay pending the appeal. The lower courts said it does not, even though the Federal Arbitration Act (FAA) gives companies special treatment in that they can appeal before a case is over.
By and large, businesses say arbitration is faster and cheaper than litigation, while consumer advocates say it gives businesses a big advantage.
If Coinbase loses, all sorts of companies could be forced into court battles that are not only longer and more expensive, but could bring embarrassing publicity and bigger awards.
“If [the plaintiffs] try to compel discovery in district court and then they get access to discovery, which could have embarrassing details, it could spill into the papers,” Coinbase attorney Neal Katyal told the judges, Yahoo Finance reported. He said:
Hassan Zavareei, a lawyer for Bielski, told the court:
Still, reports suggest that Coinbase got the worst hearing, with many judges appearing to come down on the plaintiff’s side. That included conservative Chief Justice John Roberts and liberal Justice Elena Kagan, both of whom suggested that the special privileges the FAA provides for launching appeals while the case is pending are “a pretty valuable thing,” in Kagan’s words.
“Isn’t that enough?” Roberts asked.
By and large, only Justice Brett Kavanaugh seemed to favor Coinbase’s position, while most of the rest seemed skeptical that a right to an automatic stay exists that is not mentioned in the law.
But win or lose, a crypto company has brought the industry another small step into the mainstream.
